Your browser isn't supported
It looks like you're using an old web browser. To get the most out of the site and to ensure guides display correctly, we suggest upgrading your browser now. Download the latest:

Welcome to the MSE Forums

We're home to a fantastic community of MoneySavers but anyone can post. Please exercise caution & report spam, illegal, offensive or libellous posts/messages: click "report" or email forumteam@.

Search
  • FIRST POST
    • u03ekw
    • By u03ekw 6th Dec 17, 5:25 PM
    • 108Posts
    • 7Thanks
    u03ekw
    Mortgages - one big one or several smaller ones?
    • #1
    • 6th Dec 17, 5:25 PM
    Mortgages - one big one or several smaller ones? 6th Dec 17 at 5:25 PM
    I'm hoping there are a couple of people here with multiple mortgages who can shed light on this!

    I'm about to remortgage my current house and found out that I can actually take out about £100,000 which I plan to buy a flat to let out for £100,000.

    I have done numerous calculations regarding the below using the Mortgage Calculator (on this site) but I must be missing a trick - why is having two mortgages, one on a lower interest, better than having one mortgage with a great interest rate?

    My question - anyone know which is better:

    1. I can get a mortgage at 1.09% for my house if I don't withdraw money from it. Then I can buy a flat to let with another mortgage of say 2% after my deposit. Total monthly fees =£920+x = around £1400 also.

    2. I can get a mortgage at 1.09% for my house even after withdrawing £100,000 and can buy the flat to let outright. Total mortgage fees monthly = £1400

    As you can see both have the same monthly fees even though I'm paying more interest in 2. And when I use the Excel calculator, scenario 1 is somehow better because I end up paying less interest into the big mortgage, and paying off more total capital than 2.
Page 1
    • u03ekw
    • By u03ekw 6th Dec 17, 5:31 PM
    • 108 Posts
    • 7 Thanks
    u03ekw
    • #2
    • 6th Dec 17, 5:31 PM
    • #2
    • 6th Dec 17, 5:31 PM
    This one http://www.locostfireblade.co.uk/spreadsheet/Index.html
    • Slithery
    • By Slithery 6th Dec 17, 6:09 PM
    • 364 Posts
    • 527 Thanks
    Slithery
    • #3
    • 6th Dec 17, 6:09 PM
    • #3
    • 6th Dec 17, 6:09 PM
    You need to think about tax-efficiency as well, as interest on a BtL mortgage is deductible.
    • ThePants999
    • By ThePants999 6th Dec 17, 6:12 PM
    • 902 Posts
    • 1,056 Thanks
    ThePants999
    • #4
    • 6th Dec 17, 6:12 PM
    • #4
    • 6th Dec 17, 6:12 PM
    Sorry, I'm not following. Please expand your two examples with actual amounts and mortgage term.

    If you're properly comparing apples to apples, the only thing that matters is the interest rate. You'll pay the same on two £50K mortgages as you would on one £100K mortgage, if they have the same interest rate and term. Borrowing some money at 1.09% and some at 2% should be worse than all of it at 1.09%, so you're missing something that's different in your two cases.
    • Cakeguts
    • By Cakeguts 6th Dec 17, 6:15 PM
    • 3,280 Posts
    • 4,565 Thanks
    Cakeguts
    • #5
    • 6th Dec 17, 6:15 PM
    • #5
    • 6th Dec 17, 6:15 PM
    Before you get any further on this. How much research have you done into the lettings market in the area where you are thinking of buying the flat? What sort of tenant do you have in mind and is there any market for £100,000 flat for that kind of tenant?

    If there isn't a market for £100,000 flats in your area than doing the sums for the mortgages is a waste of time.
    • getmore4less
    • By getmore4less 6th Dec 17, 7:08 PM
    • 30,783 Posts
    • 18,391 Thanks
    getmore4less
    • #6
    • 6th Dec 17, 7:08 PM
    • #6
    • 6th Dec 17, 7:08 PM
    You need to think about tax-efficiency as well, as interest on a BtL mortgage is deductible.
    Originally posted by Slithery
    Interest on any debt used to by the property gets the relief it does not have to be secured on the let property.
    • getmore4less
    • By getmore4less 6th Dec 17, 7:13 PM
    • 30,783 Posts
    • 18,391 Thanks
    getmore4less
    • #7
    • 6th Dec 17, 7:13 PM
    • #7
    • 6th Dec 17, 7:13 PM
    I'm hoping there are a couple of people here with multiple mortgages who can shed light on this!

    I'm about to remortgage my current house and found out that I can actually take out about £100,000 which I plan to buy a flat to let out for £100,000.

    I have done numerous calculations regarding the below using the Mortgage Calculator (on this site) but I must be missing a trick - why is having two mortgages, one on a lower interest, better than having one mortgage with a great interest rate?

    My question - anyone know which is better:

    1. I can get a mortgage at 1.09% for my house if I don't withdraw money from it. Then I can buy a flat to let with another mortgage of say 2% after my deposit. Total monthly fees =£920+x = around £1400 also.

    2. I can get a mortgage at 1.09% for my house even after withdrawing £100,000 and can buy the flat to let outright. Total mortgage fees monthly = £1400

    As you can see both have the same monthly fees even though I'm paying more interest in 2. And when I use the Excel calculator, scenario 1 is somehow better because I end up paying less interest into the big mortgage, and paying off more total capital than 2.
    Originally posted by u03ekw
    how bigs the deposit?
    how much are you borrowing at 2%?

    if it is less then a £100,000 then that's probably your answer.
    • u03ekw
    • By u03ekw 7th Dec 17, 9:12 AM
    • 108 Posts
    • 7 Thanks
    u03ekw
    • #8
    • 7th Dec 17, 9:12 AM
    • #8
    • 7th Dec 17, 9:12 AM
    Thanks everyone for your replies.
    Here's some clarification about the figures:

    I'm about to remortgage my current house and found out that I can actually take out about £100,000 which I plan to buy a flat to let out for £100,000.

    I have done numerous calculations regarding the below using the Mortgage Calculator (on this site) but I must be missing a trick - why is having two mortgages, one on a lower interest, better than having one mortgage with a great interest rate?

    My question - anyone know which is better:

    1. I can get a mortgage at 1.09% for my house (£200,000 left to pay) if I don't withdraw money from it. Then I can buy a flat to let with another mortgage of say 2% after my deposit (deposit of £20,000 and the flat being worth £100,000). Total monthly fees =£920+x = around £1400 also.

    2. I can get a mortgage at 1.09% for my house even after withdrawing £100,000 (so £300,000 left to pay) and can buy the flat to let outright. Total mortgage fees monthly = £1400

    As you can see both have the same monthly fees even though I'm paying more interest in 2. And when I use the Excel calculator, scenario 1 is somehow better because I end up paying less interest into the big mortgage, and paying off more total capital than 2.
    • getmore4less
    • By getmore4less 7th Dec 17, 10:39 AM
    • 30,783 Posts
    • 18,391 Thanks
    getmore4less
    • #9
    • 7th Dec 17, 10:39 AM
    • #9
    • 7th Dec 17, 10:39 AM
    you are borrowing different amounts

    £200k @ 1.09% + £80k at 2%

    or

    £300k @ 1.09% with £20k still in the bank

    you need to do the one your house with £280k and nothing in the bank


    Have you done the tax calculations on the BTL yet?
    • Mutton Geoff
    • By Mutton Geoff 7th Dec 17, 11:25 AM
    • 998 Posts
    • 1,036 Thanks
    Mutton Geoff
    I would borrow at the cheapest rate. If you can put it all on residential that's great. A little known rule amongst small time landlords is you can allocate 100% of your purchase costs against loans elsewhere. I had a couple of BTLs with their own 60% LTV mortgages but then I "allocated" the remaining 40% and purchase costs to my residential mortgage on the basis that had I not decided to go into the BTL business, I could have reduced my own personal borrowings by the amounts that are now invested in my business.


    I offset 100% of my BTL investment interest against a combination of my specific BTL mortgage and residential mortgages on my own home for over 10 years.


    I've since sold up the BTLs and consolidated into a larger single residence since CGT is currently 0% on residential gains. My latest purchase has an attached "granny flat" which meant I can get multiple purchase SDLT relief and don't have to pay the 3% second property surcharge.


    A good accountant is key.
    Compensations/Refunds from Banks & Institutions - £4,165 | Stooz Profits - £7,636 | Quidco - £4,014

    All with a big thank you to Martin and MSE.com from Mutton Geoff!
Welcome to our new Forum!

Our aim is to save you money quickly and easily. We hope you like it!

Forum Team Contact us

Live Stats

327Posts Today

2,301Users online

Martin's Twitter